Common Misconceptions About ULIP

Do you think it is the right time for you to buy a life insurance plan and ensure the financial protection of your family? Have you been advised to invest in ULIPs, but feel a bit hesitant to go ahead with the investment? If so, you are not alone. There are many people who are a little apprehensive about buying ULIPs due to misconceptions regarding their purpose, performance and cost structure. 

Common Misconceptions About ULIPs

Here are some of the common myths or misconceptions regarding ULIPs that you must be aware of:

• ULIPs Are High Risk Due to Their Affiliation With Equity Markets

The truth is that in the case of ULIPs, you can easily select your investment on the basis of the level of risk you are willing to take. You can completely take your decision on the basis of your risk appetite and circumstances. It is up to you to decide whether you want to go for a conventional fund or a fast-growing fund. 

• ULIPs Are More Expensive As Compared to Investment Products

The truth is that ULIPs were expensive almost a decade ago. With the passage of time, fund management fees, as well as the premium charges for ULIPs, have changed. Please note that IRDAI has capped charges at 3% of gross yield for policies with a term of up to 10 years and 2.25% for policies with terms above 10 years, thereby reducing charges and commission of ULIPs. 

• ULIPs Do Not Yield Good Returns

The truth is that ULIPs offer insurance cover. Moreover, they must not be compared to pure investment plans that lack insurance coverage. If you want to invest for more than 5-7 years, ULIPs is definitely the best option to go with.  

• ULIPs Cannot Be Surrendered Before Maturity

The truth is that ULIPs can be surrendered after a determined period. An investor has the freedom to surrender the plan after a determined period, which usually is 5 years from ULIP plan commencement.

• ULIP Life Cover Gets Affected by Market Volatility

The truth is that irrespective of the market fluctuations, the life cover in ULIPs remains the same. ULIPs are generally linked to the equity market, but even in the case of a bear market, the life cover remains the same despite the fund values hitting an all-time low. 

It is always advisable for investors to consider ULIPs objectively and also keep other aspects like surrender value, loyalty bonuses on maturity, level of cover needed and more in mind before going ahead with the plan. It must not be forgotten that Unit Linked Insurance Plan or ULIP is a unique product that secures your family while helping one grow money in the long run.

Having said that, if you want to gain insurance as well as an investment under a single plan, go ahead and buy a ULIP without giving it a second thought. Don’t let any of the misconceptions affect your decision.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.